Prof. Marmar Mukhopadhyay vs Union Of India & Ors.
2013 Latest Caselaw 3048 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         W.P.(C) No. 2566/2007
%                                                         18th July, 2013

PROF. MARMAR MUKHOPADHYAY                        ......Petitioner
                Through: Mr. K.K.Rai, Sr. Adv. with Mr. S.K.Pandey,
                         Advocate.


                          VERSUS

UNION OF INDIA & ORS.                                         ...... Respondents

                   Through:              Mr. Amitesh Kumar, Advocate for R-2 and


CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?        Yes.


VALMIKI J. MEHTA, J (ORAL)

1. The petitioner-Prof. Marmar Mukhopadhyay has filed this writ

petition seeking two reliefs. The first relief claimed is for quashing of the

memorandum/chargesheet dated 28.11.2006. The second relief which is claimed is

for quashing of the letter dated 30.11.2006 whereby the respondent no.2/employer

has withheld the gratuity amount of the petitioner. I note that in the writ petition

the basic challenge is to the memorandum/showcause notice dated 28.11.2006, and

for which purpose, the factual and legal cause of action is laid out. The second

prayer of the petitioner for release of gratuity is really consequential on the fact

that if the memorandum/chargesheet dated 28.11.2006 is quashed, there would

then be no entitlement thereafter for the respondent no.2 to withhold the retirement

gratuity amount of the petitioner.

2. In this case several hearings have taken place at the stage of final

arguments. Petitioners had relied upon certain judgments of the Supreme Court to

contend that departmental proceedings cannot continue after the retirement of the

petitioner on 30.11.2006. On behalf of the respondent no.2, the entitlement to

continue the enquiry after retirement was argued to exist on account of Rule 9 of

the CCS (Pension) Rules, 1972 because as per the relevant rules and regulations of

the respondent no.2, in case there is no provision made in the rules of the

respondent no.2, then, the CCS (Pension) Rules are to apply. Arguments were in

fact more or less concluded, but at the stage of dictation of the judgment it

transpired that actually the gratuity which is payable to the petitioner in this case

will be governed, not by Rule 9 of the CCS (Pension) Rules, but, payment of

gratuity is governed by the Payment of Gratuity Act, 1972. No defence was taken

by the respondent no.2 of disentitlement to continue with the enquiry proceedings

on account of the provisions of Payment of Gratuity Act, 1972, and more

particularly Section 4(6) thereof. However, since the admitted position was that

the gratuity was payable to the petitioner in terms of the Payment of Gratuity Act,

and admitted facts raised purely a legal issue (not a factual one), both parties were

put to notice with respect to whether or not enquiry proceedings in the present case

can or cannot continue in view of Section 4(6) of the Payment of Gratuity Act,

1972. Both the parties have accordingly been heard at length. Both the parties

have also cited judgments which I would be referring to hereinafter.

3. Let me first set out the arguments which have been addressed on

behalf of the petitioner. On behalf of the petitioner, it is contended that on the

retirement of an employee, unless the rules of the employer-organization so permit,

enquiry proceedings must compulsorily cease i.e on the retirement of an employee,

the enquiry proceedings automatically lapses in the absence of the specific rule

entitling continuation of the enquiry. It is argued that since there are no rules in this

case of the employer permitting continuation of the departmental proceedings after

the retirement of the petitioner, the charge-sheet must be set aside for this very

reason only. It is also argued that Section 4(6) of the Payment of Gratuity Act does

not permit holding of departmental enquiries after retirement of an employee.

Reliance for this purpose is placed upon the following judgments of the Supreme

Court:-

(i) State Bank of India Vs. A.N.Gupta & Others (1997) 8 SCC 60

(ii) Bhagirathi Jena Vs. Board of Directors, O.S.F.C. & Others (1999) 3 SCC

(iii) Jaswant Singh Gill Vs. Bharat Coking Coal Ltd. and Others (2007) 1 SCC

4. In the judgment in the case of State Bank of India (supra), the

following paragraphs are relied upon:-

"14. In the case before the Andhra Pradesh High Court (T.Narasiah) the petitioner was an officer in the State Bank. Disciplinary proceedings were initiated against him but before these could be completed the officer was informed by the Bank through its letter dated May 5, 1976 that it was not possible for the Bank to complete the enquiry well in time before the officer attaining the age of 60 years which was the date of his superannuation. He was told he would therefore cease to be in the Bank's service on the date of his superannuation and he would not be paid any subsistence allowance with effect from that date. The officer was treated as having retired and ceasing to be in the employment of the Bank with effect from May 10, 1976. The officer claimed his Provident Fund and Pension and on Bank's refusal to pay the same, a writ petition was filed. During the course of the hearing of the writ petition it was submitted by the Bank that it had since decided to pay the Provident Fund in full to the officer and Bank had also no objection to pay his contribution to the pension and that as far as the payment of Bank's share in the Pension Fund was concerned, the officer was not entitled there to unless and until the Bank granted the same in accordance with Rule 11 of the Pension Rules. It was contended before the Andhra Pradesh High Court by the officer that Rule 11 had no application in his case and on attaining the age of superannuation he automatically went out of the service of the Bank. The Bank, however, relied on Rule 11 to withhold Bank's contribution to the Pension Fund. The court was of the view that Rule 11 had to be read in its context and consistent with the object behind the said Rule. It held that Rule applied not only in the case of the retirement contemplated by Rule 19 but also to cases of retirement of employees on attaining the age of superannuation. The court observed that it might happen that the irregularities of misfeasance of an employee could not be detected well before his retirement so as to initiate and complete disciplinary enquiry in the matter and again there might be a case where disciplinary enquiry was initiated but could not be completed before the delinquent employee attained the age of superannuation. The court noted that there was no provision in the Service Rules of the Bank providing for extension of service of an employee to enable the authorities to complete the disciplinary enquiry against him which power was available under the Government Service Rules. The court said even if an enquiry was pending against an employee there was nothing to stop him from retiring on his attaining the age of superannuation. The

enquiry could not continue after his retirement. The court was, therefore, of the opinion that it was for that reason that the Bank had reserved to itself the power to sanction the pensionary benefits under Rule 11 and if there was nothing wrong with the service of an employee throughout, the Bank would naturally sanction the pension, but if there was sufficient material disclosing grave irregularities on the part of the employee, the Bank might be well within its power in refusing to sanction the pensionary benefits, or in sanctioning them only partly. The learned Single Judge of the Andhra Pradesh High Court then went on to hold as under:

"Of course, such a decision has to be arrived at fairly, which necessarily means after holding an enquiry, giving a fair opportunity to the concerned officer to defend himself against the accusation. Such an enquiry would not be a 'disciplinary enquiry' within the ordinary meaning of the term, but an enquiry confined to the purposes of the rules, viz., whether the employee should be granted any pensionary benefits; and if so, to what extent? Such an enquiry can also be made after the retirement (of an employee; and particularly in cases of retirement) on attaining the age of superannuation, probably such enquiries will have to be conducted only after retirement."

The Court, therefore, gave direction as to how the enquiry was to be conducted against the officer so as to entitle him the pensionary benefits if he was exonerated. We are afraid that this view of the Andhra High Court does not commend to us. By giving such an interpretation to Rule 11 the Andhra Pradesh High Court has, in effect, lent validity to disciplinary proceeding against an employee even after his superannuation for which no provision existed either in Pension Rules or in the Service Rules and when the High Court had itself observed that an enquiry even if initiated during the service period of the employee could not be continued after his retirement on superannuation.

15. Rule 10 of the Pension Rules provides for forfeiture of all claims for pension if an employee is dismissed from service of the Bank for wilful neglect or fraud. This rule specifically provides for forfeiture of the pension. It could not therefore be said that under Rule 11 again the pension of an employee could be withheld on these or similar grounds. In our view last sentence of Rule 11 which says that an employee who shall leave the service without sanction of the Executive Committee of the Central Board of the Bank shall forfeit all claims for pension would not include the holding of the employee guilty of wilful neglect or fraud which is envisaged in Rule 10.

Rule 11 particularly the latter portion of this Rule would be applicable where an employee leaves the service of the Bank before reaching the age of superannuation or the Bank requires him to retire before that date on his becoming incapacitated or otherwise. It cannot be said that an employee retires only on superannuation and there is no other circumstance under which an employee can retire. Retirement on superannuation is not the only mode of retirement known to service jurisprudence. There can be other types of retirements like premature retirement, either compulsory or voluntary. It would be in the case of a premature retirement or any other contingency when an employee leaves the service of the Bank before he superannuates that Rule 11 would become applicable. Retirement on superannuation is automatic as per Rule 26 of the Service Rules. No further action on the part of the Executive Committee of the Central Board of the Bank would be required in such a case and Rule 11 will not be applicable.

16. Right to receive pension is a right to property under Rule 7 of the Pension Rules when it says that no employee shall have any right of property in the pension fund beyond the amount of his contribution to the pension section of the fund with interest accrued there on. That being so Rule 11 cannot be interpreted to mean that claim to pension of an employee on superannuation can be defeated by the Bank by merely withholding sanction of retirement. For about 8 years when these two matters were pending in the Delhi High Court the Bank did not take any decision in terms of Rule 11 to sanction retirement of the respondents. The Bank never communicated to the respondents that it had withheld sanction to their retirement or did not approve their service. It. is only during the course of proceedings in the High Court that the Bank came up with the plea that it wanted to have the allegations against the respondents enquired into. To us the language of the Rule 11 appears quite explicit. No sanction is required from the Bank to leave the service on reaching the age of superannuation as provided in Rule 26 of the Service Rules applicable to Assistants. Rule 25 of the Service Rules clearly mandates the retirement of an employee on his attaining the age of superannuation and there cannot be two opinions on that. We, therefore, hold that Rule 11 has no application in the case of the respondents who retired on attaining the age of superannuation. We cannot agree with the plea of the Bank that sanctioning of retirement must be understood as sanctioning of service which in term must be understood as approval of service. Proceeding in the garb of disciplinary proceedings cannot be permitted after an employee has ceased to be in the service of the Bank as Service Rules do not provide for continuation of disciplinary proceedings after the date of superannuation. Sanction of the Bank is required only if the retirement of an employee is by any other method except superannuation. We do not think that the decision of

the Andhra Pradesh High Court in T. Narsiah v. State Bank of India and Ors. and that of the Bombay High Court in J.K. Kulkarni v. State Bank of India, have laid down good law.

(emphasis is as relied behalf of the petitioner)

5. In the judgment of Bhagirathi Jena (supra), the paragraph which has

been relied upon is para-7 and which reads as under:-

"7. In view of the absence of such provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on 30.6.95, there was no authority vested in the Corporation for continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In the absence of such authority, it must be held that the enquiry had lapsed and the appellant was entitled to full retiral benefits on retirement."

(emphasised portion relied upon by petitioner)

6. In the case of Jaswant Singh Gill (supra) reliance is placed upon

para-10 and which reads as under:-

"10. The provisions of the Act, therefore, must prevail over the Rules. Rule 27 of the Rules provides for recovery from gratuity only to the extent of loss caused to the company by negligence or breach of orders or trust. Penalties, however, must be imposed so long an employee remains in service. Even if a disciplinary proceeding was initiated prior to the attaining of the age of superannuation, in the event, the employee retires from service, the question of imposing a major penalty by removal or dismissal from service would not arise. Rule 34.2 no doubt provides for continuation of a disciplinary proceeding despite retirement of employee if the same was initiated before his retirement but the same would not mean that although he was permitted to retire and his services had not been extended for the said purpose, a major

penalty in terms of Rule 27 can be imposed."

(emphasized portion relied upon by petitioner)

7. When we refer to para-10 of the judgment in the case of Jaswant

Singh Gill (supra) the same quite clearly holds that penalties can only be imposed

so long as the employee remains in service and if an employee attains the age of

superannuation prior to closing of the disciplinary proceedings question of major

penalty by removal or dismissal from services would not arise. It has further been

observed that entitlement to continue the departmental proceedings is only if the

services of the employee are extended for the purpose of the enquiry proceedings.

Supreme Court thereafter observed in para 7 in the case of Bhagirathi Jena

(supra) that departmental proceedings cannot continue unless there was a

provision for continuing the departmental enquiry after superannuation in the

relevant rules of the employer-organization.

In my opinion, para-13 of the judgment in Jaswant Singh Gill (supra)

would also be relevant because the Supreme Court in the case of Jaswant Singh

Gill (Supra) arrived at a finding that there is no entitlement to withhold the

gratuity because the conditions which were required for applicability of Section

4(6) had not arisen inasmuch as in the facts of that case the Disciplinary Authority

had not passed an order quantifying the loss or damage because the Disciplinary

Authority observed that punishment cannot be imposed after retirement . In the

case of Jaswant Singh Gill (Supra) the Disciplinary Authority had passed an order

dated 5.7.2000 ( which is reproduced in para-3 of the judgment) that since the

charged official in that case had superannuated from service, no punishment of

dismissal could be imposed. However, the Disciplinary Authority, still directed

forfeiture of the gratuity of the charged official, and therefore the issue was that if

there exists no order of punishment as imposed by the Disciplinary Authority

whereby the existence of the conditions of Section 4(6) of the Payment of Gratuity

Act are made out, then, how can there be an entitlement of the employer to

withhold gratuity. The ratios as given in paras 10 and 13 of the judgment in the

case of Jaswant Singh Gill (Supra) are independent of each other i.e Supreme

Court has independently observed of disentitlement to continue the enquiry

proceedings after superannuation and has also separately found that in the facts of

that case since there was no order of the Disciplinary Authority quantifying the

loss or damage or existence of other conditions of Section 4(6) of the Payment of

Gratuity Act, 1972, hence there could not be forfeiture of the gratuity as ordered by

the Disciplinary Authority.

8. In the relevant para-7 in the case of Bhagirathi Jena (supra), the

disciplinary enquiry was not concluded before the chargesheeted official

superannuated and reliance was placed by the employer upon Regulation 44 of the

Orissa Financial State Corporation Staff Regulations, 1975 to deduct the amount

from the provident fund of an employee. In these circumstances, the Supreme

Court in para-7 of Bhagirathi Jena (supra) has held that the employer-corporation

has no legal authority to make any reduction in the retiral benefits of the

chargesheeted employee or for conducting of a disciplinary enquiry after

retirement of the appellant because Regulation 44 did not so permit. It is important

to note that no provision was found as observed by the Supreme Court which

provided that in case misconduct is established there could be a deduction made

from the retiral benefits. This aspect would be important as would be averred to by

me later on in this judgment. The Supreme Court has also observed that on the

retiring of the charged official there was no authority vested in the corporation for

continuing the departmental enquiry even for the purpose of imposing any

reduction in the retiral benefits payable to the charged official.

9. In the case of State Bank of India (supra), the Supreme Court has

noted in para 14 that there was no provision in the service rules of the employer-

bank providing for extension of service to an employee to complete the

disciplinary enquiry. It was also held that validity cannot be given to disciplinary

proceeding after superannuation when no provision existed even in the Pension

Rules or Service Rules of the organization. The last few lines of para 16 of the

judgment show that the Supreme Court holds that proceedings in the garb of

disciplinary proceedings cannot be permitted after an employee has ceased to be in

the service of the Bank as Service Rules do not provide for continuation of

disciplinary proceedings after the date of superannuation.

10. On behalf of respondent no.2-UGC, the following judgments have

been relied upon:-

(i) State of Uttar Pradesh Vs. Brahm Datt Sharma & Anr. (1987) 2 SCC 179

and

(ii) State of Maharashtra Vs. M.H.Mazumdar (1988) 2 SCC 52

11. In the case of M.H.Mazumdar (supra) reliance is placed upon paras 4

to 6 of the judgment and which read as under:-

4. There is no dispute that the respondent had retired from service on attaining the age of superannuation on September 1, 1977 and charges were served on him on October 16, 1978 after about a year of his retirement. Undisputably the proceedings against the respondent were initiated after the respondent ceased to be in service of the State Government. The proceedings culminated into an order of the State Government reducing the respondent's pension by 50 per cent. The question is whether the State Government was competent to take action against the respondent by reducing his pension. Conditions for grant of pension to a Government servant of the State of Maharashtra are regulated by the Bombay Civil Services Rules (hereinafter referred to as the Rules). Rule 184 provides for grant of pension admissible under the rules to Government servant who is borne on its establishment. Rules 188 and 189 relevant for our purpose are as under:

188. Government may make such reduction as it may think fit in the amount of the pension of a Government servant whose service has not been thoroughly satisfactory.

189. Good conduct is an implied condition of every grant of pension. Government may withhold or withdraw a pension or any part of it if the pensioner be convicted of serious crime or be found to have been guilty of grave misconduct either during or after the completion of his

service, provided that before any order to this effect is issued, the procedure referred to in Note I to Rule 33 of Bombay Civil Services Conduct, Discipline and Appeal Rules shall be followed.

5. The aforesaid two Rules empower Government to reduce or withdraw a pension. Rule 189 contemplates withholding or withdrawing of a pension or any part of it if the pensioner is found guilty of grave misconduct while he was in service or after the completion of his service. Grant of pension and its continuance to a Government servant depend upon the good conduct of the Government servant. Rendering satisfactory service maintaining good conduct is a necessary condition for the grant and continuance of pension. Rule 189 expressly confers power on the Government to withhold or withdraw any part of the pension payable to a Government servant for misconduct which he may have committed while in service. This Rule further provides that before any order reducing or withdrawing any part of the pension is made by the competent authority the pensioner must be given opportunity of defence in accordance to the procedure specified in Note I to Rule 33 of the Bombay Civil Services Conduct, Discipline and Appeal Rules. The State Government's power to reduce or withhold pension by taking proceedings against a Government servant even after his retirement is expressly preserved by the aforesaid Rules.

The validity of the Rules was not challenged either before the High Court or before this Court. In this view, the Government has power to reduce the amount of pension payable to the respondent. In M. Narasimhachar v. The State of Mysore : (1960)ILLJ798SC , and State of Uttar Pradesh v. Brahm Datt Sharma and Anr. : [1987]2SCR444 , similar Rules authorising the Government to withhold or reduce the pension granted to the Government servant were interpreted and this Court held that merely because a Government servant retired from service on attaining the age of superannuation he could not escape the liability for misconduct and negligence or financial irregularities which he may have committed during the period of his service and the Government was entitled to withhold or reduce the pension granted to a Government servant.

6. The High Court in our view committed serious error in holding that the State Government had no authority to initiate any proceedings against the respondent. In B.J. Shelat v. State of Gujarat and Ors, disciplinary proceedings had been initiated against the Government Servant for purpose of awarding punishment to him after he had retired from service. The ratio of that decision is not applicable to the instant case as in the present case the

purpose of the enquiry was not to inflict any punishment; instead the proceedings were initiated for determining the respondent's pension. The proceedings were taken in accordance with Rules 188 and 189 of the Rules. It appears that the attention of the High Court was not drawn to these Rules."

(emphasized portions relied upon by respondents)

12. On the basis of the aforesaid paras, it is argued by the respondents that

since in accordance with the Rules 188 and 189 of the Bombay Civil Services

Rules Supreme Court entitled continuation and conduct of the enquiry even after

retirement, hence even in the facts of the present case, there is nothing in Section

4(6) of the Payment of Gratuity Act, 1972, which prohibits holding of an enquiry

and in fact this provision permits holding of an enquiry even after superannuation

of charged official because this provision after passing of appropriate orders

entitles forfeiture of the gratuity of retired employee. It is argued that in the present

case, orders of the Disciplinary Authority could not be passed only on account of

interim orders of the Court, and which orders otherwise would have been passed

and therefore, an act of the Court cannot harm the respondent no.2 i.e Disciplinary

Authority of respondent no.2 should now be allowed to pass an appropriate order

and which order will decide as to whether respondent no.2 is entitled to withhold

the gratuity amount because one or more of the requirements of Section 4(6) of the

Payment of Gratuity Act, 1972 stand satisfied or not. It is also argued that three

Judge Division Bench in M.H.Mazumdar (supra) very categorically states that

merely because a government servant retires from service on attaining the age of

superannuation he cannot escape the liability of misconduct or negligence or

financial irregularities which he may have committed during the period of his

service, and, consequently the Government was entitled to withhold or reduce

the pension granted to a Government servant by conducting enquiry proceedings

even after retirement of an employee. It is argued that the provision of Section

4(6) of the Payment of Gratuity Act must be read in the same manner as was done

by the Supreme Court qua Rules 188 and 189 of the Bombay Civil Services Rules

i.e Section 4(6) does permit holding of disciplinary proceedings after the

retirement of an employee and then to pass an order of forfeiture of gratuity.

13. In Brahm Datt Sharma's case (supra) reliance is placed upon para-5

and which reads as under:-

"5. The question which falls for consideration is whether notice dated 29.1.86 was invalid and liable to be quashed. The learned single Judge of the High Court quashed the notice on the sole ground that the allegations specified in the show cause notice were the same which had been the subject matter of departmental inquiry resulting in the respondent's dismissal from service, and since dismissal order had been quashed in the writ petition, it was not open to the State Govt. to take proceedings for imposing any cut in the respondent's pension on the same set of charges. We do not agree with the view taken by the High Court. While quashing the order of dismissal the learned Judge did not quash the proceedings or the charges instead; he had quashed dismissal order merely on the ground that the respondent was not afforded opportunity to show cause against the proposed punishment as the recommendation with regard to the quantum of punishment made by the Inquiry Officer had not been communicated to him. In fact while allowing the writ petition the learned single Judge himself observed in his order dated 10.8.84 that it would be open

to the State Govt. to draw fresh proceedings if it was permissible to do so. The High Court did not enter into the validity of the charges or the findings recorded against the respondent during the inquiry held against him. After the decision of the writ petition, it was open to the State Govt. to have taken up proceedings against the respondent from the stage at which it was found to be vitiated. Had the respondent not retired from service on attaining the age of superannuation it was open to the State Govt. to pass order awarding punishment to him after issuing a fresh show cause notice and supplying to him a copy of the recommendation made by the Inquiry Officer. There was no legal bar against the State Govt. in following such a course of action. There were serious allegations of misconduct against the respondent which had been proceeded against him during inquiry, those charges remained alive even after quashing of the dismissal order and it was therefore open to the State Govt. to take action against the respondent in accordance with the rules. No disciplinary proceedings could be taken as the respondent had retired from service, the Govt. therefore considered it appropriate to take action against him under Article 470 of Civil Service Regulations. The Regulation vests power in the appointing authority to take action for imposing reduction in the pension, as the State Govt. is the appointing authority it was competent to issue show cause notice to the respondent. The notice specified various acts of omissions and commissions with a view to afford respondent opportunity to show that he had rendered throughout satisfactory service and that the allegations made against him did not justify any reduction in the amount of pension. If disciplinary proceedings against an employee of the Govt. are initiated in respect of misconduct committed by him and if he retires from service on attaining the age of superannuation, before the completion of the proceedings it is open to the State Govt. to direct deduction in his pension on the proof of the allegations made against him. If the charges are not established during the disciplinary proceedings or if the disciplinary proceedings are quashed it is not permissible to the State Govt. to direct reduction in the pension on the same allegations, but if the disciplinary proceedings could not be completed and if the charges of serious allegations are established, which may have bearing on the question of rendering efficient and satisfactory service, it would be open to the Govt. to take proceedings against the Govt. servant in accordance with rules for the deduction of pension and gratuity. In this view the High Court committed error in holding that the show cause notice was vitiated."

(emphasis as relied on by respondents)

14. Specific reliance is placed on behalf of respondent no.2 upon that

portion of para-5 above which states that if disciplinary proceedings against an

employee of the government are initiated with respect to misconduct committed by

him during the period of service, and if such employee retires from service on

attaining age of superannuation but before completion of the departmental

proceedings, it is open to the Government to direct deduction to be made from his

pension on proof of the allegations made against him. Reliance is also placed on

the last few lines of the said para which holds that it would be open to the

Government to take disciplinary proceedings against the government servant in

accordance with the rules for deduction from his pension and gratuity. More

importantly, it is argued by the respondents relying upon the observations in

Brahm Datt Sharma's case (supra) that Disciplinary Authority if it accepts the

report of the Enquiry Officer will give a specific notice to the petitioner not only

for challenging the enquiry report but also as to why gratuity of the petitioner

should not be forfeited in terms/in compliance with Section 4(6). It is argued that

the disciplinary proceedings will now in fact stand converted to

enquiry/departmental proceedings under Section 4(6) of the Payment of Gratuity

Act.

15. One thing is clear from all the judgments which have been cited on

behalf of both the parties that Supreme Court has held that there must be an

entitlement in accordance with the statutory rules or rules of the organization

which entitle withholding of terminal benefits such as pension or gratuity or other

terminal benefits and if rules so provide then enquiry proceedings can be held even

after retirement of an employee. I may note that rules, whether the same are

statutory or they are non-statutory rules of the organization, will pertain to different

heads of payment to be made for different terminal benefits such as pension or

gratuity or provident fund or leave encashment and the like. What is required to be

emphasized is that whenever an employer-organization seeks to withhold or forfeit

any payment under any one particular head of terminal benefits payable to an

employee on superannuation, that action qua that head of terminal benefit will have

to be justified in accordance with the relevant rules as applicable, whether statutory

or otherwise. None of the judgments of the Supreme Court (except the judgment

in the case of Jaswant Singh Gill (supra) and which is discussed hereinafter) state

that there is disentitlement to withhold or forfeit terminal benefits or to continue

with the enquiry even if there does exist, either any statutory rules or rules of the

employer-organization for the purpose. The most important aspect to be noted is of

distinction between enquiries to impose punishment to an employee and those

enquiries to withhold or forfeit certain terminal benefits. While the latter is

permitted even after retirement in accordance with the relevant provisions, the

former is not permitted vide para 6 of the M.H.Mazumdar's case (supra).

16. At this stage, with all respect and humility to the ratios of the

judgments of the Supreme Court stated above, I have to observe that every

individual i.e whether a private individual or a corporate body or Union

Government or State Government etc etc, if it has moneys in its hand, of any

person, then, if such private person or corporate body or the Union or State

Government or any other legal entity has been caused loss or damages or other loss

to its property (i.e of the employer-organization) by the person whose money is

held, then, such an individual or body or Union Government or the State

Government is surely under the general law entitled to adjust/appropriate or at least

withhold the amounts in its pockets for the amount due to it till there is

adjudication of contested contentions involving disputed questions of fact in

appropriate court case of having or not having caused the loss by an employee.

What I mean to say is that it is one thing of a right to conduct or continue with

enquiry after superannuation in terms of the relevant statutory or non-statutory

rules, and it is a totally separate thing to claim entitlement of withholding or

appropriation/adjustment under general law. Even if there may be no right to hold

an enquiry for withholding/forfeiture/adjustment/appropriation, yet, under general

law this entitlement of withholding etc is always there and with the only exception

that if any laws or rules of the organization mandates that the terminal benefits be

paid and there cannot be withholding/appropriation of the same. Putting it

differently, entitlement to withhold or appropriate/adjust in accordance with the

general law is subject to any statutory provisions or rules of the employer-

organization which does not entitle withholding or the appropriation/adjustment

because the said statutory rules or rules of the organization in fact on the contrary

directs payment to be made of terminal benefits in the event of superannuation of

an employee. Therefore, I hold that an employer-organization which is the Union

of India or the State Government or an instrumentality of State under Article 12 of

the Constitution of India may not be able to conduct disciplinary proceedings after

retirement of a person, however, there always exists entitlement to withhold etc the

amounts under general law unless a statutory rule or rule of the organization

mandates payment of the amounts to a superannuated employee. I have recently

had an occasion to consider this aspect in the judgment in the case of Jagat Singh

Vs. Syndicate Bank & Ors. W.P.(C) 5177/2011 decided on 8.7.2013, and in which

judgment I have relied upon an earlier Division Bench judgment of this Court in

the case of Walchandnagar Industries Vs. Cement Corporation of India, 2012 (2)

ARBLR 19 (Delhi). The relevant paragraphs of the judgment in the case of Jagat

Singh (supra) are paras 4 to 8 and which read as under:-

"4. I asked the counsel for the respondent No. 1-Bank to show me what are the rules of the respondent No. 1-Bank which entitles the respondent No. 1-Bank either to withhold or appropriate the amounts which are otherwise due to an ex-employee. Learned counsel for the respondent No. 1-Bank says that as of today no rules are filed on the record of this Court. In my opinion, even if no rules are filed on the record, yet, whether for withholding or for

appropriation of the amounts, the respondent No. 1-Bank which is a State under Article 12 of the Constitution of India cannot do so without conducting necessary enquiries which hold the petitioner guilty of the alleged losses caused to the bank. Thereafter, it was perfectly permissible for the respondent No. 1-Bank to appropriate or at least withhold the amounts which are now claimed by the petitioner, unless a law mandates payment to the petitioner. I may mention that simple withholding of an amount is not illegal because even if there are no rules of an organization ( and a relevant rule is Rule 9 of CCS (Pension) Rules, 1972 entitling withholding of pension and gratuity) even under the general law, an organization can always withhold or appropriate/adjust amounts lying with it because payment in spite of a claim of withholding an appropriation would amount to payment to be made to an ex-employee which would result in payment of a disputed amount which is claimed by the organization on account of losses caused by the employee. In fact there is always a legal right to appropriate amounts already in the hands of a person and which belongs to another person, if the person holding/appropriating the same does it towards his entitlement vide Walchandnagar Industries Ltd. Vs. Cement Corporation of India, 2012 (2) ARBLR 19 (Delhi). The only exception is if law or rules of the employer direct/require the payment and thus disentitles appropriation/adjustment. As already stated above, appropriation is actually adjustment in legal terms and is part of the genre of equitable set off.

5. I also asked the counsel for respondent No. 1-Bank to show me the enquiry proceedings and the orders which were passed entitling the respondent No. 1-Bank to withhold the amount as stated in the communication dated 27.07.1999, however, counsel for the respondent No. 1-Bank has failed to show me any Departmental Proceedings i. e issuance of show cause notice, holding of an enquiry and thereafter passing of an order holding the petitioner guilty of causing losses to the respondent No. 1-Bank and, therefore, the entitlement of respondent No. 1-Bank to appropriate this amount.

6. Therefore, the order which is required to be passed in the facts of the present case is that before appropriating the amount i.e deciding that the amount has not to be paid to the petitioner, the respondent No. 1-Bank will have to hold enquiry against the

petitioner. Respondent No. 1-Bank is entitled to conduct an enquiry to find out whether petitioner is liable for the losses as stated in the letter dated 27.07.1999. However, on a query put to the counsel for the petitioner, counsel for the petitioner on instructions from petitioner who is present in the Court, states that petitioner will not participate in the enquiry which is to be conducted by the respondent No. 1-Bank. If that be so, it will be a futility to direct respondent No. 1-Bank to conduct an enquiry proceeding for determining the amounts which are stated as having been appropriated in the letter dated 27.07.1999.

7. In view of the aforesaid position, there are disputed questions of facts which require trial as to whether or not petitioner has caused losses to the respondent No. 1-Bank or that no loss is caused to the respondent No. 1-Bank. If loss is caused, under the general law, respondent No. 1-Bank can always withhold and appropriate the amount due to it from the person who caused loss to the respondent No. 1-Bank. Allowing of the writ petition would therefore amount to passing of a money decree for an amount when there exists disputed questions of facts. It is only after such disputed questions of facts are decided by an appropriate civil court in favour of the petitioner can then there be issued the direction as being prayed by the petitioner.

8. In view of the above, the writ petition is dismissed reserving liberty to the petitioner to file a civil suit for recovery of the amounts which are claimed by him and the amount respondent No. 1-Bank is held presently entitled to withhold the amounts of the petitioner with it subject to the final decree of the civil court."

17. Before this Court, when we focus ourselves on the facts and

issues as raised in this case, decision is required of this Court with respect to the

two issues. The first issue is whether in the facts of the present case, there is no

entitlement of the respondent no.2/employer-organization to continue with

departmental enquiry after retirement of the petitioner for the purpose of forfeiting

of gratuity after the superannuation of the petitioner, and secondly that even if

there is no entitlement to continue with the departmental enquiry, yet, there is no

entitlement in the respondent no.2-employer organization to withhold etc the

amounts which it claims are lying with it, and for the loss which the employer-

organization claims had been caused to it on account of the superannuated

employee.

18. The four judgments relied upon by both the parties i.e the earlier

judgments in the cases of M.H.Mazumdar (supra) and Brahm Datt Sharma

(supra) on behalf of the respondents and A.N.Gupta(supra) and Bhagirathi Jena

(supra) on behalf of petitioners, lay down the ratio that if rules exist of the

employer-organization or there are such statutory rules which deal with the subject,

then, departmental proceedings can go on even after retirement of an employee. In

the cases of A.N.Gupta (supra) and Bhagirathi Jena (supra) it was held that

departmental proceedings after retirement could not be continued because there

were no rules of the employer-organization permitting continuation of the

proceedings. In the case of M.H.Mazumdar (supra) and Brahm Datt Sharma

(supra) Supreme Court entitled continuation of the departmental proceedings

inasmuch as it was held that the relevant rules in those cases did permit

continuation of departmental enquiry or in fact initiation of departmental enquiry

after the retirement/termination of services of an employee. Therefore there is no

conflict between the ratios of the two judgments in the cases of A.N.Gupta

(supra) and Bhagirathi Jena (supra) relied upon on behalf of the petitioners and

M.H.Mazumdar (supra) and Brahm Datt Sharma (supra) on behalf of the

respondents.

19. Now, let us turn to the ratio laid down by the Supreme Court in

the case of Jaswant Singh Gill (supra) as relied upon on behalf of the petitioner.

A reading of the judgment shows that in the facts of the case before the Supreme

Court the order of dismissal of services of an employee was not passed simply on

the ground that the employee had in the meanwhile superannuated, though the

Disciplinary Authority held that actions of the employee were such that he would

have been visited with the punishment of dismissal from service, if he had not

superannuated, and hence the Departmental Authority therefore directed forfeiture

of gratuity. This order of the Departmental Authority was set aside by the

Supreme Court by giving two reasons. The first reason was that the Supreme

Court held that in spite of a rule of the employer-organization which permitted

continuation of departmental proceedings after retirement, yet, the said rule cannot

prevail because on retiring of an employee the question of imposing a major

penalty by removal or dismissal from services would not arise because services

had not been extended for the said purpose. It was held that once an employee is

permitted to retire, disciplinary proceedings initiated before retirement cannot

continue for imposing a major penalty. Accordingly, Section 4(6) of the Payment

of Gratuity Act, 1972 was read to mean that impression "termination of services"

will have to be read to mean passing of orders of termination of services before

retirement of the employee. The second reason given by the Supreme Court was

that since the Disciplinary Authority had not quantified the loss or damages hence

the requirement of sub-clauses of Section 4(6) of the Payment of Gratuity Act was

not complied with and hence for this second reason gratuity could not be forfeited.

In a way the second reasoning given by the Supreme Court in the case of Jaswant

Singh Gill (supra) is an alternative reasoning to the first reasoning because if first

reasoning stood of no entitlement existing for imposing a penalty against a retired

employee, there was no further need or requirement for the Supreme Court to hold

that loss or damage in terms of Section 4(6) is not quantified. Issue of

quantification would have only arisen if in terms of the first reason given that the

employee would had not retired, but factually, the employee had retired in the case

of Jaswant Singh Gill (supra) and in spite of that fact of the retirement having

taken place Supreme Court denied entitlement of forfeiture of gratuity on the

ground that the Disciplinary Authority had not quantified the loss or damage and

therefore in a way took the order of the Departmental Authority as passed after

retirement as valid and yet held that the order will have no bearing because the

order did not quantify the loss or damage.

20. The issue is whether the first reasoning which is given by the

Supreme Court in the case of Jaswant Singh Gill (supra) that no punishment can

be imposed after retirement of an employee is a valid ratio in law.

21. In my opinion, the ratio of the Supreme Court in the case of

Jaswant Singh Gill (supra) that although the rules of the employer-organization

permit continuation of the departmental proceedings yet departmental proceedings

cannot continue after retirement, is in direct conflict with the ratios of the four

earlier judgments in the cases of A.N.Gupta (supra), Bhagirathi Jena (supra),

M.H.Mazumdar (supra) and Brahm Datt Sharma (supra). In all these four

judgments, it is specifically held by the Supreme Court that if the rules of the

employer-organization permit continuation of departmental proceedings after

retirement of an employee such proceedings can continue. It is settled law that a

later Division Bench of same number of Judges of the Supreme Court cannot

prevail over an earlier Division Bench of same number of Judges of the Supreme

Court. This is so held by the Supreme Court in the case of Union of India & Ors.

Vs. S.K.Kapoor (2011) 4 SCC 589 and para 9 of which reads as under:-

"9. It may be noted that the decision in S.N.Narula case (2011) 4 SCC 591 was prior to the decision in T.V.Patel case (2007) 4 SCC 785. It is well settled that if a subsequent coordinate Bench of equal strength wants to take a different view, it can only refer the matter to a larger Bench, otherwise the prior decision of a coordinate Bench is binding on the subsequent Bench of equal strength. Since, the decision in S.N.Narula case was not noticed in T.V.Patel case, the latter decision is a judgment per incuriam. The decision in S.N.Narula case was binding on the subsequent Bench of equal strength and hence, it could not take a

contrary view as is settled by a series of judgments of this Court."

Therefore, in my opinion, the ratio laid down in the case of Jaswant Singh Gill

(supra) (by a Division Bench of two judges) that even if there are rules of the

employer-organization to permit continuation of departmental proceedings after

retirement, yet such proceedings cannot continue to stand in view of the ratios of

earlier Division Bench judgments of two judges of the Supreme Court. Further it

is settled law that judgment of a Division Bench of larger number of Judges will

prevail over the judgment of a lesser number of Judges of a Division Bench of the

Supreme Court as held in the Constitution Bench judgment in the case of Union of

India & Anr. Vs. Raghubir Singh (Dead) by LRs. Etc. (1989) 2 SCC 754. The

decision of the Supreme Court in the case of M.H.Mazumdar (supra) is of a

Division Bench of three Judges and therefore will prevail over the judgment of the

Supreme Court in the case of Jaswant Singh Gill (supra) and which is of a

Division Bench of two judges. It also may be additionally noted that in the

judgment in the case of Jaswant Singh Gill (supra) no reference is being made to

the binding judgment of the Division Bench of three Judges in the case of

M.H.Mazumdar (supra).

22. Therefore, looking at it from any manner i.e whether earlier

judgment in the case of M.H.Mazumdar (supra) being of a Division Bench of

three Judges or that earlier judgment of same number of Judges of a Division

Bench prevails over the later judgment of the same number of Judges of the

Division Bench, I am bound to follow the ratio which is laid down by the Supreme

Court in the judgments in the cases of M.H.Mazumdar (supra) and Brahm Datt

Sharma (supra).

23. In view of the aforesaid discussion with respect to bindingness

of the ratios in the judgments of M.H.Mazumdar (supra) and Brahm Datt

Sharma (supra) we will have to read the provisions of Section 4(6) of the Payment

of Gratuity Act. Once the ratio of the judgment of the Supreme Court is that

departmental proceedings can continue even after retirement if the rules of the

organization or statutory rules so permit, then, I am of the opinion that the

provision of Section 4(6) of the Payment of Gratuity Act must be read by putting

more stress not on the aspect of the fact that dismissal order or termination of

services order against an employee cannot be passed after retirement but the

substance and heart of Section 4(6) is that the action of the employee is such that

loss or damage caused to the employer during the period of service of the

employee and which can result in an order of termination of services i.e what is

important is not passing of an actual order of termination of services before

retirement but the loss or damage caused to the employer-organization which can

entail order of termination of services of an employee if the employer had

continued to be in service. The fact that order of termination of services cannot be

passed because of retirement of the employee in the meanwhile cannot mean that

the loss or damage has not been caused to the employer which otherwise could

have resulted in dismissal/termination of services of an employee. That being so,

the provisions of Section 4(6) will have to be read in the same manner as was done

by the Supreme Court with reference to Bombay Civil Services Rules 188 and 189

in the case of M.H.Mazumdar (supra) i.e entitling an employer to continue with

the departmental proceedings even after retirement of the employee.

24. I do not find anything in the applicable provision of Section 4(6) of

the Payment of Gratuity Act, 1973 which brings to an end automatically the

continuation of an enquiry against a charged employee merely on account of

superannuation/retirement. If the provisions of Rules 188 and 189 have been held

in the case of M.H. Mazumdar (supra) to enable continuation of the departmental

proceedings after retirement of an employee, I find that the provision of Section

4(6) also does provide entitlement of forfeiture on account of loss or damages

caused by an employee and which entitlement does not bear any co-relation to the

incidence of retirement of an employee because nothing in Section 4(6) of the

Payment of Gratuity Act at all provides that on retirement there is disentitlement to

continue the enquiry /departmental proceedings against a superannuated employee.

All that the provision of Section 4(6) provides is that once the services have been

terminated ie in effect can be terminated if employee was in service or the

employee being found guilty of act or willful omission or negligence causing any

damage or loss or destruction of property belonging to the employer, then,

forfeiture can be made of the gratuity, and if that be so, this provision does not in

any manner prohibit continuing of the departmental enquiry after superannuation

of the charged official/retiring employee.

25. Therefore, in the facts of the present case, I hold that there is no

disentitlement of the employer-organization-respondent no.2 to continue with the

departmental enquiry against the petitioner/charged official because the relevant

provision being Section 4(6) of the Payment of Gratuity Act, 1972 does not bring

to an end an enquiry which is commenced during the employment, and in fact, the

said provision 4(6) entitles commencing of an enquiry even after retirement of a

charged official, and which is also the ratio of M.H.Mazumdar (supra). I

therefore interpret the provision of Section 4(6) of the Payment of Gratuity Act to

entitle the employer-organization not only to continue a departmental enquiry after

superannuation of an employee but also to commence departmental proceedings

against the employee even after his superannuation/retirement, subject to the fact

that such proceedings are not disciplinary proceedings but are

enquiries/departmental proceedings to determine the existence of conditions of

Section 4(6) of the Payment of Gratuity Act.

26. The matter does not end at that. I have already referred to the

judgment delivered by me in the case of Jagat Singh (supra). Even assuming that

the respondent no.2 has arguendo no right to continue with the departmental

proceedings against the petitioner, I am of the opinion that nothing in Section 4(6)

mandates actual payment to a retired employee in the facts of the cases such as the

present where it is only because of interdicting by a learned Single Judge of this

Court of passing of a final order in a disciplinary proceedings and only because of

which an order has not been passed for quantifying the loss or damage which could

have resulted in terminating the services of an employee on account of an act or

willful omission or negligence causing damage or loss to or destruction of,

property belonging to an employer. That order if had been allowed to be passed it

could have consequently entitled forfeiting of the gratuity on account of the loss

caused. An act of Court harms no one. Interim orders cannot have existence for

creating vested rights of substantive proceedings. Since I have held that

respondent no.2 was entitled to commence or continue inquiry even after

retirement of an employee, I now entitle the respondent no.2 to pass appropriate

orders by its appropriate authority (because admittedly the departmental

proceedings have come to an end and enquiry report has been given) in terms of

above observations that the proceedings will now not be disciplinary proceedings

for imposing punishment but the proceedings will be in terms of Section 4(6) of

the Payment of Gratuity Act, 1972 and as to whether any of its requirements stand

satisfied for passing of the order in the departmental proceedings for forfeiture of

gratuity. The position in the present case in this regard will be slightly different

than the ratio of the judgment in the case of Jagat Singh (supra) because in the

present case, the situation is not that the charged official is not willing to

participate in the departmental enquiry/proceedings. Therefore, once the

respondent no.2 as an instrumentality of the State has conducted the departmental

proceedings in which the petitioner has participated, the respondent no.2 will in

accordance with the orders to be passed by the appropriate authority, or any other

Appellate Authority if so provided, take action, and as per the orders of such

Departmental Authorities pay or withhold or forfeit the gratuity of the petitioner.

In case the orders of the Departmental Authorities pass a particular order which

does not entitle forfeiture of the gratuity of the petitioner, then, the respondent no.2

will be bound to release the gratuity amount or part thereof or whatever amount as

the case may be to the petitioner.

27. In view of the above, the writ petition is dismissed by holding that

there is no disentitlement in the respondent no.2/employer-organization to continue

with the departmental enquiry against the petitioner/charged official merely

because the petitioner/charged official has superannuated/retired during the

pendency of the enquiry proceedings. In view of the long passage of time and so

that the necessary finality is achieved with respect to issues for or against the

petitioner, the appropriate authority is directed to pass appropriate orders within a

period of eight weeks from today. It is also ordered that if there have to be further

departmental proceedings, including of appeal, then preferably all the departmental

proceedings will be concluded within a period of six months from today. Parties

are left to bear their own costs.

JULY 18, 2013                                       VALMIKI J. MEHTA, J.
ib